Headwinds Favor Strong Banks in 2013: Analyst

Major banks' stocks have been on a tear lately — up 40 percent in the past six months versus the S&P 500's 9 percent rise — but one analyst is wary of big challenges in the new year, challenges that favor the industry's strongest players.

"There's a lot of optimism that's starting to get baked into these (financials') names, but I still see a lot of headwinds potentially clouding that optimism," said Brennan Hawken, a banks analyst at UBS.

He says regulatory and political pressure threaten to limit growth opportunities, while that planned central clearing of the derivatives market is of particular concern.

The global regulatory standard known as Basel III, along with the Volcker rule, will also put heavy pressure on certain types of trading, in particular FICC — fixed income, currency and commodities — which he described as "principle trading."

The practical effect will be to pressure smaller players, such as Morgan Stanley, to shrink or exit the business, while leaving dominant players such as JPMorganto improve their returns.

Hawken also said that the Fed the is going to remain reluctant to give some banks permission to return capital to shareholders.

"The trouble is (banks) have got to kiss the ring of the Fed in order to get permission to return capital to shareholders," and this favors the banks the regulators believe in and whose internal controls they trust, namely Goldman Sachs and JPMorgan, Hawken said.